9911796707
TMI Blog1964 (4) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... oning the scheme, the liabilities of the company consisted of ( i ) secured creditors of the value of Rs. 1,34,80,000 and ( ii ) un secured creditors of the value of Rs. 1,82,58,000. Under the scheme, the unsecured creditors, who were not the workers, agreed to receive 15 per cent, of their dues in cash and 10 per cent, on or before December 31,1958. As regards the balance of 75 per cent, of the dues, they agreed to accept debentures to be issued by the company. The petitioner-company was an unsecured creditor in respect of unpaid price of goods sold by it to the company. The price payable to it was Rs. 13,017-12-0. Having regard to the scheme that was sanctioned, it was paid, in the first instance, 15 per cent, of the debt and thereafter 10 per cent, of the debt. For the balance of 75 per cent., i.e ., Rs. 9,700, it was given debentures. The form of the debentures recites, inter alia , the issue of 35, 000 third mortgage debentures of Rs. 100 each, the issue having been made in terms of the trust deed dated December 31, 1958. The operative part of the debentures provides as follows : " The Sholapur Spinning and Weaving Company Limited will on the first day of January, 1964 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to pay to the other debentare-holders who were unsecured creditors of the company in 1958 interest aggregating to Rs. 9,50,000. The company has been incurring heavy losses since the sanction of the scheme. In 1958, the company incur red huge loss of Rs. 5,55,795. The company has not been able to pay the company's contributions for provident fund to the Commissioner of Provident Funds. The company is unable to carry on its business without incurring heavy losses and is otherwise in insolvent circumstances. The company is unable to pay its debts, its substratum is gone and the company is commercially insolvent. Under these circumstances, the petitioner's case is that it is just and equitable that the company should be ordered to be wound up. The contentions that are made on behalf of the opposing parties, being the company and some of the creditors, are ( i ) that the petitioner being a debenture-holder is not entitled to prosecute the petition and the petition is accordingly misconceived, ( ii ) that the assets, when considered in correct light, are sufficient to clear off all liabilities of the company, ( iii ) that having regard to the value of the assets, there is a feasibi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner to the extent of Rs. 39,17,671 and allows the same to remain in arrears and also does not pay the employees' contribution amounting to Rs. 1,67,775 to the Regional Director, Employees' State Insurance Corporation, must, for all purposes, be held to be unfit to continue in existence. These are liabilities enforced against companies to provide for the welfare of workers and the companies which do not make these payments and allow the arrears of these amounts, to grow must always be liable to be wound up. It is impossible that such companies should be allowed to function. In this connection, it may be stated that the company has failed to pay about Rs. 74,00,000 in respect of bills for electricity charges and about Rs. 2,20,000 in respect of charges for supply of water. Consequent upon this failure, the power supply has been cut off since January, 1964, and the company has not been working at all since that date. The company has also failed to pay to the workers' societies various amounts collected from different workers in connection with supplies made by the societies to the workers. The company has made this default in spite of having recovered diverse amounts from the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents on the first day of July and on the first day of January in each year, the first of such payments to be made on the first day of July, 1959. " Having regard to the above contents of the debentures, it is clear that there is direct covenant given by the company to pay to each debenture-holder the principal sum of Rs. 100 on January 1, 1964, or at an earlier date and also to pay in the meanwhile interest at 6 per cent, on July 1 and January 1, each year. The condition 9 and the deed of trust, however, provide that the remedies for recovery of principal moneys and interest secured by the debentures are exclusively vested in the trustees on behalf of the debenture-holders. The operative part of the debenture, when read with condition 9, appears to me to provide that in so far as the right to enforce security created by the debenture trust deed is concerned, it is not permissible for an individual debenture-holder to enforce the security and he has no right of action or suit or of taking any proceedings to enforce the security. The contention that there is no direct covenant in favour of the petitioner by the company to make payment to him of the principal amount of Rs. 100 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany [1884] 27 Ch. D 278 . In the latter case, the English court held that the holder of some of the debentures, the interest on which was overdue, was entitled to petition for the winding up of the company. The principle that emerges from these cases has been clearly stated in Buckley on the Companies Acts (page 465) : " A holder of debenture stock constituted by trust deed in the ordinary form, under which the debenture stock certificates do not contain any direct covenants with the stockholders to pay the principal or interest of the stock to them, is not, either as to principal or interest, a creditor, either legal or equitable, of the company, so as to be entitled to present a winding-up petition, his right of action being only through the trustees. But where the obligation to debenture-holders was direct by the company to pay the bearer, the bearer could present a petition." Having regard to that principle, in the case of Bachharaj Factories Ltd. v. Hirjee Mills Ltd. [1955] 25 Comp Cas 227 ; 57 Bom. LR. 378 the court came to the conclusion that the contention made by the company that the petitioner was not entitled to maintain the petition was not well conceive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re land, buildings, plant, machinery, etc . The particulars of these assets are in schedule "D". The net value of these assets is shown in the balance-sheet at Rs. 68,53,946 as at March 31, 1963. The value of the land is shown at Rs. 4,31,291 and the value of the Latur ginning and pressing factory is shown at Rs. 24,000. It is pointed out on behalf of the company that the pressing factory at Latur has been sold for the price of about Rs. 4,90,000. It is also pointed out that the land value has risen precipitately and there are about 3 lakhs square yards of surplus lands with the ' mills and the value of these lands will be many times more than Rs. 4,21,291 shown in the balance-sheet. The contention is that the true value of the assets of the company is not Rs. 68,53,946, but is about Rs. 3,50,00,000. It is obvious that in making the argument the company has not taken into consideration the capital gains tax liable to be paid by the company in respect of sudden rise in the values of certain of its assets by reason of mere efflux of time. The contention that the true value of the assets will be Rs. 3,50,00,000 appears to me to be not well founded. Even if the company is likely to re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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